Adv Accounting Chapter 1

Chapter 01 The Equity Method of Accounting for Investments Multiple Choice Questions 1. Gaw contact owns 15% of the green stock of Trace Corporation and grant the fair-value mode to account for this enthronement. Trace reported light up income of $110,000 for 2008 and gainful dividends of $60,000 on October 1, 2008. How much income should Gaw recognize on this investment in 2008? A. $16,500 B. $9,000 C. $25,500 D. $7,500 E. $50,000 fuss: Easy 2. Yaro participation owns 30% of the usual stock of Dew Co. and uses the beauteousness rule to account for the investment. During 2008, Dew reported income of $250,000 and nonrecreational dividends of $80,000. There is no amortization associated with the investment. During 2008, how much income should Yaro recognize related to to this investment? A. $24,000 B. $75,000 C. $99,000 D. $51,000 E. $80,000 trouble: Easy 3. On January 1, 2008, Pacer Company paid $1,920,000 for 60,000 sha res of Lennon Co.s voting common stock which represents a 45% investment. No allocation to grace or other special(prenominal) account was made. Significant curve all over Lennon was achieved by this acquisition. Lennon distributed a dividend of $2.50 per share during 2008 and reported net income of $670,000. What was the balance in the Investment in Lennon Co.

account make up in the financial records of Pacer as of December 31, 2008? A. $2,040,500 B. $2,212,500 C. $2,260,500 D. $2,171,500 E. $2,071,500 Difficulty: middling 4. A company should always use the equity method to account for an invest ment if A. It has the ability to do signi! ficant diverge over the operating policies of the investee B. It owns 30% of a nonher companys stock C. It has a overbearing interest (more than 50%) of another companys stock D. The investment was made earlier to earn a return on excess cash E. It does not have the ability to exercise significant influence over the operating policies of the investee Difficulty: Easy...If you requisite to get a broad(a) essay, order it on our website: OrderCustomPaper.com

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